Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Ltd and another [2013] EWHC 1279 (Ch)

A clause requiring repayment of rent following an effective break notice will not be implied into a lease; express clauses must be used to protect tenants.

The Court of Appeal has overturned the High Court’s decision confirming that unless there is an express clause in the lease, the tenant will not be entitled to a refund of rent paid for a period after a break date regardless of how much overpayment has been made.

It further confirmed that even when a lease states that rent is payable ‘proportionately for any part of a year’ this does not require an implied term for repayment of rent following the termination of a lease pursuant to a break clause.

It is important to note that the Court’s refusal to imply a term requiring a refund extended to other sums paid under the lease; in this particular case insurance rent and a car parking fee.

Tenants now need to accept that unless the break clause includes an express clause requiring a refund, they will not be entitled to a refund of any sums paid for a period following a break date, except for service charges. The Court of Appeal had already determined in the 2007 case of Brown’s Operating System Services v Southwark Roman Catholic Diocesan Corporation [2007] EWCA Civ 164 that a tenant is only liable to pay for sums actually expended by the landlord prior to the expiry of the lease so any unspent monies belong to the tenant and should be refunded to it.

 

Martin Retail Group Limited v Crawley Borough Council (Case 3CL 10014) Central London County Court

Letting scheme user clause may constitute a breach of the Competition Act 1998.

The Central London County Court has decided that a use restriction in a lease breaches the Competition Act 1998. Chapter I of the Competition Act, which has since 2011 applied to all land agreements, prohibits any agreement which prevents, restricts or distorts competition. This case concerns a disputed lease renewal where the tenant sought to widen the original user clause which limited the use of the shop premises to being used only for the retail trade of newsagents, tobacconist, confectionary, stationary and the sale of books, toys, records, fancy goods and greeting cards. The premises was 1 of 11 retail units owned by the Borough Council and operated under a letting scheme which ensured that no 2 premises would have conflicting uses. One of the other units was a grocery store which sold alcohol and, therefore, the Borough Council refused to extend the user clause in the new lease to allow for the premises to be operated as a convenience store, to include selling groceries and spirits.

The Borough Council acknowledged that its letting scheme would restrict competition in the sale of convenience goods on the parade of shops so the Court only had to determine whether the Borough Council could satisfy one of the exemptions under the Act. The Court held that the Council could not provide sufficient evidence to prove that the conditions for exemption had been met and, therefore, ruled that the restriction on use was prohibited by the Act.

Case law on this issue is fairly scarce so there has been wide interest in this lower Court decision. It is yet to be seen how far-reaching its impact will be and each case will, of course, be determined on its particular facts. It is important to note that, in this case, the parade of shops was the only retail premises within the Estate and this could be a useful distinction for landlords who do want to operate a form of letting scheme.

 

Windmere Marina Village Ltd v Wild and others [2014] UKUT 163 (LC)

Only the Upper Tribunal has the final say in determining the apportionment for a variable residential service charge.

The case concerns residential long leases the Upper Tribunal (Lands Chamber) determined that the apportionment of a service charge determined by a third party will not be final and binding even if the parties have agreed to the contrary in the lease. This decision will come as a blow to landlords who could previously have relied on this provision to avoid a challenge from leaseholders as to how service charges have been apportioned.

The Upper Tribunal determined that any clause in a lease to that effect would be rendered void by section 27A(6) of the Landlord and Tenant Act 1985 which allows either a landlord or a tenant to apply to the First Tier Property Tribunal for a determination as to the amount of service charge to be paid. The Court held that the effect of its finding was that the lease should be read as though that clause had been struck out which, in this case, rendered the third party surveyor’s conclusion as wholly irrelevant allowing the Tribunal to disregard whether such conclusions were reasonable and simply substitute its own determination.

It should be noted that this decision will only apply where apportionment has not been agreed by the parties at the outset, therefore, going forward, landlords would be well advised to fix proportions at the outset to avoid potential challenges by leaseholders.

For more information about any of these cases or for advice on a contentious property issue please contact Michael Clark